Kenya insurers halve underwriting loss to KSH1.26bn in Q2

Patrick Alushula reports on the 2019 half-year figures from the Kenyan insurance market, which provide some notes of optimism Kenyan insurers cut underwriting losses by 54% to KSH1.26bn in the second quarter of 2019, marking a significant improvement from the KSH2.66bn loss posted in the same quarter last year. Insurers will hope for another strong performance for the remainder of the year but will have to address challenges such as falling penetration, which closed last year at 2.47%, a 15-year low. The Insurance Regulatory Authority’s (IRA) consolidated industry report for the three–month period ending June 2019 showed that growth in gross written premium and a reduction in claims incurred helped insurers book the improved performance. “General insurance business underwriting results improved significantly by 52.8% at the end of Q2 2019 to record an underwriting loss of KSH1.26bn,” IRA noted. Kenya’s insurance firms are desperate to recover from last year’s performance where profits dipped to KSH3.54bn, the lowest in 12 years – chiefly blamed on price undercutting, fraud and overceding of premiums to overseas players. The industry’s gross written premium closed the second quarter of 2019 at KSH117.28bn, representing an increase of 4.4% from KSH112.39bn in the previous year’s second quarter. Long-term insurance and general insurance segments grew by 6.9% and 2.9% respectively. The general insurance business was the largest contributor to Kenya’s industry insurance activity, accounting for KSH73.03bn, or 62.3% of the total premium. Five insurers – Jubilee Insurance, APA General, Britam, CIC and UAP – jointly controlled 38.9% of total gross premium. Motor and medical insurance classes of business accounted for 66.8% of gross premiums in the general insurance segment. Claims incurred amounted to KSH28.84bn during the period under review – a decrease of 1.3% from KSH29.21bn reported in the preceding year’s second quarter. This was driven by aviation, fire, personal accident, theft and workers compensation – all which booked a reduction in claims incurred. Loss ratio, a measure of claims incurred as a percentage of net earned premium income, dropped from 65.33% to 64.16%. This was significant, given that the industry’s average during the last three years has been 64.34%. However, the industry’s combined ratio was 102.8%, with ratios higher than 100% being recorded in seven of the 13 classes of general insurance business. Private motor incurred the highest losses at KSH1.98bn, followed by commercial motor and liability, with losses of KSH472.54m and KSH187.48m respectively. Long-term insurance business also booked an improved performance, with gross premium income jumping from KSH41.39bn to KSH44.25bn. This was also supplemented by investment income, which grew 33.7% to KSH23.02bn. However, just six of 26 insurers offering long-term insurance business controlled more than 71.8% of the total premiums. The six were: Britam Life Assurance, Jubilee Insurance, ICEA Lion Life Assurance, CIC Life Assurance, Sanlam Life and Liberty Life Assurance. “The remaining 20 companies controlled 28.2% of the market, indicating that the Kenyan long-term insurance segment is dominated by a few players,” IRA said. Pensions and life assurance remained the biggest contributors to life premiums, accounting for 37% and 29.5% respectively. During the period under review, the five reinsurers operating in the Kenyan market fared well. Their total net premium income increased significantly to KSH1.65bn, compared to KSH1.15bn reported the same quarter last year. This represents an increase of 43.7%.

Kenya insurers halve underwriting loss to KSH1.26bn in Q2

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